1.0 Introduction

Blundstone is an independent Tasmanian company that mainly produce boots, they have 2 brands of boots under their company, which are Blundstone that are sold all over the world and John Bull, which are sold only in New Zealand. Up until now Blundstone has maintained modern facilities in both Australia and New Zealand, which make it one of the most recognizable boots brands in the world. The report’s purpose is to determine whether Blundstone should expand their manufacturing production to Indonesia or not, based on PESTL and SWOT analysis.

2.0 Political Environment
2.1 Government Stability The political environment in Indonesia during the last decade was unstable, the performance of the government was rated unsatisfactory and they could not bring welfare to Indonesian citizen (Okezone 2014). SBY (Susilo Bambang Yudhoyono) as the former president of Indonesia himself admitted that SBY and his cabinet have not succeeded in clearing the corruption problems in Indonesia during his leading period (The Jakarta Post 2014). However, the new president of Indonesia, Joko Widodo, has applied some new changes in the government affairs in order to improve efficiency and effectiveness of government performance and to reduce the number of corruption problem in Indonesia (Kompas 2014). Therefore the new government are hoped to bring welfare to the Indonesian citizen.

2.2 Government Relations The relationship between Indonesia and Australia in the past seems to be unstable. Both countries started the diplomatic relation since 1947 when Australia took part as Indonesia’s representative for UNGOC (United Nations Good Offices Committee). A big conflict happened during 1986 when one of Australia’s newspapers took former Indonesia president, Soeharto, regarding their family’s financial issue as the newspaper’s main topic, but this problem was solved 2 years after. Unfortunately both of the country had another problem in 2013, when Indonesia found out that Australia’s spied on at least 10 important government placemen including the president. However, this problem had been solved in diplomatic ways, and both of the countries have created agreement in order to prevent future misunderstanding between both countries and tighten their relationship (Pustaka Digital Indonesia 2013).

2.3 Analysis Even though both countries have some problem previously and the instability happened before, but it is assumable that in the future the stability and the relations between both countries will be better due to the changes in governmental system. Therefore the opportunities to do business in the future will also be better.
3.0 Legal Environment
3.1 Business Laws

The picture above shows the level of corruption of Indonesia and Australia in 2014. Indonesia has a relatively high corruption level while Australia is considered as one of cleanest country from corruption (Transparency International 2014). However the foreign direct investment in Indonesia keep going up even thou there’s lack of legal protection for big investment, this is due to the big number of market opportunities and the natural resources offered by Indonesia to the big investors from overseas (By 2012).
3.2 Labor Laws The standard working hours in Australia is 38 hours a week (International Labor Organization, 2014) while in Indonesia, the normal working hours is 40 hours a week (Lee, Sangheon, Deirdre McCann, and Jon. C Messenger 2007, 16). In Australia, people work from the age range of 13 to 65 years old (Lawstuff, 2014 and Australian Government, 2014), where in Indonesia, the legal age to work is at the 15 years old (Badan Pusat Statistik 2011) and the normal retirement age is 55 to 65 years old (Gajimu 2014).

3.3 Analysis Although there is a difference in corruption level in both countries, the foreign direct investment in Indonesia offers opportunities to the investors. Moreover the labor laws in Indonesia and Australia are quite similar. From the two aspects, it can be assumed that the business environment in Indonesia is an opportunity for the investors.
4.0 Economic Environment
4.1 Currency exchange rate ($) The current currency exchange from Australian Dollar to Indonesian Rupiah is 1 AUD for 10,416 IDR (XE 2014). The graph below shows the fluctuation of Indonesian Rupiah towards Australian Dollar since December 2013 until now. The graph shows that Indonesian currency grew stronger from last year. If Indonesian currency continues to be stronger, that’s a disadvantage for Australia investors since it will increase the cost of productions in Indonesia.

4.2 Economic trends/forecast The new Indonesian government planned to do currency redenomination in the next few years (Kompas 2014). There are two probabilities after the redenomination. If it’s successful, then there will be no problem to overseas investors. However if the government fails to do the redenomination, there is a possibility that inflation will happen, which is also risky for the investors because the high inflation level might cause loss for the investor.

4.3 Analysis The economic environment in Indonesia can be considered as threat to the investor due to the assumption that the Indonesian currency exchange will increase and the risky economic trends in the future.
5.0 Socio-cultural Environment
5.1 Hofstede’s Cultural Dimension

(The Hofstede Centre, 2014).
5.1.1 Collectivism Vs Individualism There is a difference in the Indonesian and Australian working style. Australian tend to work individually while in Indonesia, people are tend to work as a team.
5.1.2 Power Distance In Indonesia the power distance dimension is high, which means people in Indonesian are tend to be more submissive to people with higher position. While in Australia, the power distance level is quite low. It shows that in Australia, employees are given the same right to reveal their opinions even to people with higher position.
5.1.3 Uncertainty Avoidance The uncertainty avoidance in both countries is relatively similar, but Indonesian uncertainty avoidance dimension is a little bit lower than Australian. Which means people from Indonesia still could tolerate more of the uncertainty caused by unstructured situation compared to Australian (Laznjak 2011).
5.1.4 Masculinity The masculinity level in Indonesia is lower compared to Australia. Which means that in Indonesia, people have started to have the assumption that both male and female are equal in their roles in society.
5.1.5 Indulgence The level of indulgence in Indonesia is much lower compared to Australia. In Indonesia people tend to hold their desire to have fun, due to strict social norms, it is very different from Australia where people has more freedom and really enjoying their life.
5.2 Analysis The cultural situations in both countries are mostly different. This is because Indonesia adapts to Eastern countries’ culture while Australia adapts to Western’s. In managerial function it becomes a threat since the manager needs to change the company’s working style to match with Indonesian culture.

6.0 Technological Environment
6.1 Technological Infrastructure The technological growth in Indonesia is still behind Australia. Australia is the 18th rank in world’s networked readiness index 2014 while Indonesia is only at 64th rank. However, Indonesia has ranked up from 76th in a year (World Economic Forum 2014). It might take a few years to equalize its technology with Australia’s, but looking at the technological growth of Indonesia, there is a chance that the technology will continue to grow in the future.
6.2 Communication Network
The usage of mobile phone in Indonesia increased from 164.1 millions users to 173.3 millions from 2012 to 2013 (Statista 2014). The Internet usage also grew due to booming Internet trend in Indonesia. In 2013, the Internet user in Indonesia increased by 13%, became 71.19 millions users from the previous years. Indonesian government targeted that in 2015 the number of Internet user will increase to 139 millions users (The Jakarta Post 2014).
6.3 Analysis Even though the technological environment in Indonesia is still behind from Australia, the growth in Indonesia can be categorized as a fast growth. It is predicted that it will continue to grow in the future and this could become an opportunity for the investor from the technological aspect.

7.0 SWOT analysis Strengths | Blundstone company has: 1. Been in the business since 1870.2. Built a reputation as one of the most recognizable boots brand in the world.3. Been doing recycle of the packaging and become the endorser of Australian Packaging Covenant in 2011. 4. The various models of boots that can be used for both work and daily activities. 5. Been indicated as the most famous and favorite boots brand in Australia by market research report in 2011.(Blundstone 2014) | Weaknesses | Blundstone company has: 1. Lost its loyal users because the boots that are produced in other countries beside the Australia are said to have poor quality, especially the soles (FoxChaser 2012).2. Less comfortable boots compared to the previous products produced in home country (ShearConvenience 2012). | Opportunities | Indonesia: Political Environment: * Improvement in new government systems hoped to create stability in the future. * Stabilized bilateral relationship between Indonesia and Australia.Legal Environment: * Big number of market opportunities. * Availability of resources. * Similar business laws.Technological Environment: * A fast growth of technology in Indonesia. | Threats | Indonesia: Economic: * There is a risk of inflation happened due to redenomination plan. * The currency grows stronger, increase the cost of productions.Socio cultural: * Huge differences in culture between both of the countries. |

8.0 Conclusion After all consideration shown above, Blundstone should expand their business to Indonesia. In PESTL analysis, it was shown that Indonesia as a developing country offers more opportunities than threats. Blundstone’s weaknesses due to the problem with overseas manufactured product could also be solved with a little bit adjustment in manufacturing processes.

9.0 Recommendation Areas in which Blundstone Company needed to revise and develop; 1. Improve their overseas manufacture operations standard, and make sure the products manufactured overseas have the same quality as the one produced in the home country. 2. Involve Indonesia’s local people into the company to work in managerial positions, since they know more about the Indonesian socio-cultural behavior. 3. It is better to Blundstone to use their own raw materials from their home country, because the raw materials from overseas are said to result in poor quality boots.

Executive Summary The purpose of this report is to determine whether Blundstone Company should or should not expand its manufacturing activities to Indonesia. The writer has considered some advantages and disadvantages to invest in Indonesia based on the Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis. The Political, Economical, Socio-Cultural, Technological, and Legal environment (PESTL) analysis of the country has become the main focus in determining the opportunity and threats. Political, Legal, and Technological environment in Indonesia are opportunities for Blundstone, while the Economical and Socio-Cultural are threats. The numbers of strengths are more then the weaknesses, therefore it shows that the company is capable to expand their business to Indonesia. The major problems about the quality of boots produced overseas can be solved by increasing the quality of raw materials used and by maintaining the same standard in host country with the home country.
In conclusion, Blundstone Company is recommended to expand their business operations in Indonesia since there is an opportunity for the company to gain profits and develop in the future.